How do I allocate my employees’ time for R&D claims?

R&D tax employee costs

When you’re making a claim via the government’s research and development tax credit scheme, it’s vital to know who’s working on the project and how many hours they’re putting into it. You may be surprised at how much time and effort it’s requiring!

What is the research and development tax credits scheme?

The R&D tax credits scheme is designed to offer remuneration to organisations who are seeking advancements in science and technology through innovative research. Businesses paying UK Corporation Tax are eligible to claim if they meet the criteria, and qualifying costs include staff salaries, materials you’ve used, a proportion of your utility bills and more. All these costs must be directly related to the R&D project, and you’ll need to provide evidence of how you reached your claim amount.

What employee costs can I claim?

You can claim for the costs of employing people to work on your research and development project. This includes their salaries and the pension and national insurance contributions you pay for them. You may also be able to claim for some expenses that an employee has borne and been reimbursed for, but not benefits in kind, like company cars or directors’ dividends.

If someone spends all their time working on the research and development project in question, you can claim all, or nearly all, of their employment costs. If only part of their time is spent this way, you must calculate the appropriate proportion of their costs. So if half their time is spent this way, you can claim for half their costs.

This applies not just to the people actually carrying out the research, but to those supporting them by doing other necessary tasks related to the project – for example, a maintenance person looking after the lab, or a supervisor overseeing the project.

Calculating employees’ time

While HMRC doesn’t require you to provide evidence of how your team spent their time as part of your application, your claim is more likely to be successful if you can show how you arrived at the submitted figure.

The best way to calculate the time your employees have spent on a project is by keeping records as you go along, for example through time sheets. This helps you, as when the time comes to put your claim together, you can simply reference the time sheets and input the relevant numbers, rather than trying to calculate hours and costs from scratch. It also means you’re less likely to forget to include costs for employees who are contributing to or supporting the research, but for whom it isn’t their primary role.

In any event, it’s best to seek help from an R&D tax specialist when compiling your claim. If you’d like to get an idea of how much your claim might be worth, take a look at this r&d tax credits calculator from specialist accountants R&D Tax Solutions.